The Lifecycle of Prediction Markets
Prediction markets are an innovative way to forecast future events. They allow users to buy and sell shares or tokens representing different possible outcomes, providing a more accurate forecast than traditional methods. But have you ever wondered about the inner workings of a prediction market?
In this series of articles, we will delve into the various components that make up a prediction market. Today, let’s explore the lifecycle of a prediction market, which consists of three distinct states: Open, Closed/Awaiting Resolution, and Resolved.
- Open: The market is open for trading, and users can buy and sell outcome shares. Prices fluctuate based on supply and demand, reflecting the community’s beliefs about the possible outcomes.
- Closed/Awaiting Resolution: The market closes on a predetermined date, and the governing committee determines the correct outcome. The market can be deemed invalid if there are significant issues or concerns.
- Resolved: The correct outcome is announced, and users who predicted it can claim their earnings. Shares of the winning outcome are worth 1 unit of the market’s token, while shares of incorrect outcomes are worthless. If the market resolves as Invalid, users can claim their shares back at the price they were at the moment of market closure.
That’s all for the three states. Stay tuned for our next article, where we’ll explore the market properties.
About xParametric
xParametric is a decentralized climate prediction market that revolutionizes the way we speculate on, transfer, and invest in climate risks. With a transparent and secure platform, xParametric not only offers a unique opportunity to hedge against or capitalize on shifting climate trends but also serves as a hub for raising climate awareness and collecting valuable data reflecting public sentiment around climate trends.
